The Importance of Sound Banking Procedures and Reviews by Multiple Sets of Eyes

Posted by leetabas

A recent case in the Eastern District of Pennsylvania (O’Neill, Bragg & Staffin PC v Bank of America Corp) showed that customers and bankers need to have sound procedures in place, or suffer the consequences.

The internet is full of landmines and scams. In this situation, a hacker obtained the email of the O’Neill Bragg’s president, and sent an email to the vice president in charge of banking, to wire $580,000 to Bank of China.  The VP didn’t question the email, and completed the required wire transfer procedures for Bank of America, O’Neill Bragg’s bank.  The Bank wired the funds thereafter.

About an hour after the wire was sent and confirmed, it was discovered by O’Neill Bragg that the president’s email was fraudulent.  The firm requested a stop order of the payment, but it was too late. 

Subsequently, the firm sued Bank of America.  US District Judge Harvey Bartle dismissed the lawsuit with the finding that the Bank did not breach its agreement or violate any laws.  While the loss was unfortunate, the real culprit was not the bank. He found that the O’Neill Bragg must bear the loss.

So what can we learn from this?  Firstly, bank customers need to stay on top of their accounts. Accounts need to be reconciled and reviewed.  Procedures need to be in place to require multiple people for banking procedures.  A bank account procedure may be initiated by one person, but another person needs to review the procedure and sign off on it. Paper approval procedures may be more appropriate than emails. 

From the banker’s point of view, it is important to have sound documents, and likewise to follow procedures.  A telephone call to the customer to confirm wires over a certain amount would be a sound procedure and might have prompted the vice president to rethink the fake email he received from the president.

For small firms, multiple approvals, paper signatures and telephone confirmations might save you from a nightmare. 

Tale of Three Cities – Himalayan Travelogue

Posted by leetabas

Winter 2019

The Himalayas have been on our bucket list for some time. When we saw photos of the soaring mountain range in the brochure, we were hooked.  We voyaged to Nepal (home of 8 of the world’s 10 highest mountains) and Bhutan.

Nancy and I flew Air Qatar directly from Philadelphia to Doha, Qatar and then to Katmandu, Nepal. There was a 10-hour layover in Qatar, the richest country in the world, per capita (oil).  Air Qatar offered an evening tour of the city, which fit right into our schedule.  This is a showplace for international architects; I.M. Pei designed the Museum of Islamic Art. The top of the museum resembles eye opening in women’s Islamic dress.  Buildings are colorfully illuminated; one is more beautiful than the next.  Only 13% of the residents are citizens; others have come for work opportunities.

Katmandu, Nepal was quite different.  We arrived at a dated and dingy airport. While the country is poor, it would probably be relatively easy to arrange for some entity to fund airport improvements in exchange for a contract to run it, but that takes a functioning government. The government in Nepal was a monarchy, soiled by a son murdering his father in 2001. In 2008, the country became a republic, currently ruled by the Nepal Communist Party.

Inside the airport, we were routed through a visa application line, followed by another line to check the visas we were just issued before leaving the airport.  In order to retrieve our baggage, we joined another line to re-enter and clear security back into the baggage area before exiting again. Not a smart way to run an airport!

Katmandu sounds and is exotic, but it is also a city of 5 million people, it is dirty with barely functioning infrastructure. The main road to our hotel was rutted, appeared to be dirt with piles of road debris. Supposedly it is being widened.  Why not finish a portion of the road, and then work on the next portion? Motorbikes spewed choking exhaust.  We took cabs several times, and were surprised that the small tires withstood the shock of driving through the deep ruts.

Nepal has about 70 tribes, and about 20 million inhabitants. Famous tribes are the Sherpas (Mt. Everest guides), and the Gurkhas (soldiers).  We spent 2 days in Katmandu visiting sites. Nepal is mostly Hindu with about 30% Buddhists.  Buddha was born in Nepal.  One of the most interesting visits was the home of the Kumari, a pre-pubescent girl selected and revered as a reborn goddess (similar to the Dalai Lama). 

We visited the ancient town of Bhaktapur, which was clean and attractive.  One of the buildings is being conserved and turned into a national art gallery.  We noted the estimated completion date on the sign – 2075!

No wonder the roadwork was not finished.

An interesting and macabre visit was to the funeral site in Katmandu. The dead are burned on concrete platforms next to the river, and afterwards, the ashes are swept into the river.  With the temples, the flames, monkeys running around the stone monuments, this certainly inspired some Indiana Jones scenes.

We headed out to the countryside about 30 miles from Katmandu. The trip to Nakargot over severely rutted roads took 2 hours.  Our trip had been designed so that we were progressing upward in altitude, giving us a chance to adjust.  Katmandu is about 5,000 feet. Our next stop, Nakargot, was in the foothills of the Himalayas at about 7,000 feet. The atmosphere is hazy from, I presume, wood fires and internal combustion engines.  There was a dramatic view of the Himalayas at daybreak from the rooftop observatory; otherwise, they were obscured by haze.  We did some pleasant hiking, and visited a local farming village which gave us a chance to see how peasants lived. 

After 2 days we headed back to the airport, and flew Druk (dragon) Air to Bhutan. This is a country of 750,000 people, with the capital, Thimpu of 150,000.  The difference in government function was immediately evident as we arrived at the beautiful, clean airport.  Bhutan was closed to outsiders until 1974, and now is open under limited conditions. Visitors must spend at least $250 per day, and must have a guide. Bhutan on $10 per day is not possible. This is a kingdom, with the current Oxford-educated king succeeding his father. Pictures of the royal family are everywhere.  From what our excellent guide said, the king is very involved in the operation of the country.  One of my fellow travelers characterized the government as a benevolent dictatorship, and stated that this might be the best form of government. The country is very traditional. Both men and women are required to wear customary dress at work, school, and at religious and official events.  This is sort of a kilt for men, and a long skirt and jacket of beautiful hand-woven material for women. 

In contrast to Nepal, rivers were sparkling clean, and there was good road infrastructure. It’s a safe, clean country with a lot to see.  Local crafters were humming along with the building cranes in Thimpu. There are stunning Dzong (fortresses) every 20 miles or so in Bhutan.  Originally feudal, the country was united only in 1907. The Dzong have been restored/maintained and with their dramatic locations are reminiscent of mediaeval castles in Europe. Buddhism is an important part of life with many shrines, nuns and monks.  In addition to sacred cows, both here and in Nepal, dogs are highly regarded and roam free. The main trading partner of Bhutan and source of tourists is India.  The country borders on Tibet, but because of the mountains, there are no roads. The country is mountainous, with little land suitable for agriculture. They make the most of it with terraced fields.

After several days in Thimpu, we headed out through a mountain pass into the countryside. By this time the 10,000 or so feet altitude did not bother us.  It was not as cold as one might think; altitude is mitigated by closeness to the equator. Our guide explained that to reach snow, we had to be at 12 to 15,000 feet.

Highlight of the trip was our visit to the Tiger’s Nest, a monastery perched at 11,000 feet on the side of cliff.  No gondola up- part of the experience is the climb. We began at the base of the mountain and after 3 strenuous hours reached the monastery.  To make things more civilized, there is a tea house at about the halfway point.  I passed on going into the shrine, as I did for most temples and shrines after the first few. A bit later, Nancy came running out- wheezing from the incense which burns in most temples. 

If one is fortunate enough to be able to do it, the travel is hard but this trip is fascinating, eye-opening, and informative.  

______________________________________________________________________________

TABASFUNDING provides entrepreneurs with funding to acquire or expand businesses in the form of flexible loans from $100,000 to $750,000, or more. We supplement bank and other funds, and consider most types of businesses in Pennsylvania, New Jersey, and Delaware. 

______________________________________________________________________________

LEE TABAS is available as a consultant or an expert witness. Areas of expertise include:  Ability to help through experience in banking and investing: loans, deposits, administration, collection, leadership, liability, conflicts of interest and documentation. Experience as a Trustee for Trust and Foundations.  Has track record of helping entrepreneurs with growth.  Please call for further information.

The Case for Local Banks

Posted by leetabas

October 22, 2018
Prologue to ” The Case for Local Banks”

In my Fall 2018 newsletter, I made the case for needing local banks. My cousin Jimmy Roberts, composer, pianist and entertainer, pointed me to the banker’s scene in the 1946 Movie “Best Years of Our Lives”, starring Myrna Loy, Fredric March, and Dana Andrews.

The movie is about three WWII vets returning to their homes in a mid-sized American city and readjusting to civilian life. One of them, Al, was a loan officer at the local bank; he got his job back after the war. On his first day back, in comes an Iwo Jima veteran who wants $6,000 to start a farm and has never even heard of the word “collateral.” Al approves the loan anyway. Later, Al has to answer for his actions to Mr. Milton, the bank president, as the two of them are discussing the loan:

Bank President: We were discussing this loan to this man… What’s his name? Novak.
Al: Yes. Yes, I approved it.
Bank President: May I ask, Al, on what basis?
Al: On the basis of my own judgment. Novak looked to me like a good bet.
Bank President: But the man has no collateral, no security. Evidently, you saw something in him.

Al: Yes, Mr. Milton.
Bank President: What was it?
Al: Security. Collateral. In the army, I was with men stripped of everything in the way of property except what they carried around with them and inside them. I saw them being tested. Some of them stood up to it, some didn’t. But you could tell which ones you could count on. I tell you, this man Novak is OK. His “collateral” is in his hands, in his heart, in his guts, and in his right as a citizen.
Bank President: Nobody’s denying him his rights.
Al: We are. If we deny him his chance…
Bank President: Gentlemen, there’s no need to raise our voices. Of course, since you’ve approved the loan, the incident is closed. However, in the future,
Al: Yes, I understand, Mr. Milton. In the future I must exercise more caution.
Bank President: Al, you know how I feel about you and always have. Why, I’ve always considered you one of the family, so to speak. I picked you personally for this job, and I know you’ll make good. We do have a desire to extend a helping hand to returning veterans when possible. But we must all remember that this is not our money we’re doling out. It belongs to our depositors, and we can’t gamble with it.
Al: I’ll remember, Mr. Milton.
Bank President: We’ll meet at the Union Club at 7:30. And give my best to your charming wife.

Al: Thank you, Mr. Milton.

Hope you enjoyed this excerpt from the script! Mr. Milton practices what we used to call 3-6-3 banking.  Take in deposits at 3%, Lend them out at 6%, and head to the club at 3 o’clock.

Lee Tabas


Fall 2018

Joseph DiStefano asked, in an article in the Philadelphia Inquirer on August 12, 2018, “In digital America, does Philly need a hometown bank?” The article discusses the pluses and minuses of local banks in light of the announced merger of WSFS from Delaware and Beneficial Bank headquartered in Philadelphia.

Without a doubt, the answer is YES, we do need hometown banks.  The reason is small businesses. I spent most of my career in local banking.  The combined WSFS/Beneficial entity may sound large at $12 billion in assets, but this is a drop in the bucket compared, for example, to Bank of America’s assets of $2.2 trillion. These days, with the regulatory burden and technology costs, banks need at least a couple of billion in assets to cover those expenses.

I once heard Hugh McColl, former Chairman and CEO of Bank of America speak about a customer that somehow got through to his office with a complaint about something at her local branch.  When she explained the situation to McColl, he told her to call the branch, and tell them about her McColl conversation, and explain what he said.  She later called back and said that when she told the branch representatives about McColl, they didn’t know who he was. That is one reason we need local banks. When I was a bank president, I made sure I got myself around to each office and department so that employees knew me.  If you are in senior management, you want to hear about problems and what is going on at a basic level. In person is a good way to do it.

Small business owners are hungry for personal relationships.  It is easier to have them with smaller, local banks.  Banks or most retail, non- internet businesses can do a better job if they have smaller, more manageable footprints- not thousands of locations and many activities spread across the country or the world.

I do agree with DiStefano that these days consumers don’t generally need local banks. Small businesses are different in that they need relationships, and that can’t be done remotely.  Most small business owners are good at what they do, but need to rely on outside help for banking, legal, accounting, and other services.  I have been on hundreds and hundreds of calls to small businesses in my banking career, and with my own firm which provides funding to entrepreneurs for expansion or acquisition. Looking at numbers and information is one part of evaluating businesses, but doing it the hands on, walking-around way, by visiting, meeting and looking, is at least a third of the due diligence procedure.  Despite what the big guys may say, the level of local knowledge, service, and willingness to go out on a limb is not there with most of the major banking institutions.

Early in my career, national banks were headquartered in Philadelphia. Fidelity Bank comes to mind, as one of the most impressive.  Where today most bankers are trained on the job, Fidelity had a training program. Fidelity had its own dining rooms and a talented chef. Now those perks are in Silicon Valley, at Facebook, Google, and Twitter who can afford them.

These days the closest we get to that type of bank is PNC in Pittsburgh.  Similar to Comcast, it would be great to see a major national bank headquartered in Philly.  This helps our economy by the business it brings to town. The Beneficial/WSFS merger will do some of that, but more importantly, it gives local businesses someone to talk with about their needs and whose fortunes also rise and fall on what is happening in the local economy.

________________________________

TABASFUNDING provides entrepreneurs with funding to acquire or expand businesses in the form of flexible loans from $100,000 to $750,000, or more. We supplement bank and other funds, and consider most types of businesses in Pennsylvania, New Jersey, and Delaware.   Please call for further information.

_______________________________

LEE TABAS is available as a consultant or an expert witness. Areas of expertise include:  Ability to help through experience in banking and investing: loans, deposits, administration, collection, leadership, liability, conflicts of interest and documentation. Experience as a Trustee for Trust and Foundations.  Has track record of helping entrepreneurs with growth.  Please call for further information.

______________________________

For uniquely designed bicycle clothing and gear, contact Melissa Tabas, Proprietor, LASER CATS AND SUCH, Lasercatsandsuch.bigcartel.com, 610-308-4433.

Bank Deposit Standards of Care

Posted by leetabas

As a former banker, I can’t stress enough the importance of “simple stupid” procedures regarding deposit accounts.  It is imperative that bank customers open their statements monthly and review them.

Recently, I had an inquiry looking for a banking expert regarding deposit standards of care.  A condo association had a property manager write checks payable to the condo association, and then the checks were deposited into his personal account at another bank.  This went on for some months.

The standards for all checks with corporate payees is that they may only be deposited into accounts of the same name, and may not be double endorsed (pay to the order of) or cashed.  So far this supports the condo association’s position.

However, there is also a standard in the industry that errors must be reported promptly.  Most banks require that errors be reported within 30 days.  That means that it is crucial that statements be reviewed monthly.  Probably 60 days would be OK. In the case discussed the defalcation was discovered by the condo association accountant 6 months later.  So yes, if the issue was discovered and timely reported, one bank or the other would be responsible.  Under the circumstances, had the customer acted in a timely manner, perhaps some of the losses might have been prevented.  With the late discovery, I believe that the condo association would be out of luck in recovering money from any bank in this matter.

Be sure that your clients open and review monthly their bank and brokerage account statements!

The Online Business Lending Industry

Posted by leetabas

When TABASFUNDING was founded in 2002, there were not a lot of alternatives for small business lending. Businesses could go to the bank, but banks often didn’t want to lend to small businesses. The paperwork is mostly the same, whether for small or large business borrowing.  Often, small businesses have sketchy financial information available.  It is hard to put bad information into shape, if you are a banker.

Businesses could also borrow on credit cards. I read a great bankers story about a guitar rental business owner, unconventional looking, who got turned down every time he applied in person for a business loan, but was approved for $150,000 of credit card loans at the same bank without ever going into a bank branch.

Within the last 5 years, there has been a proliferation of online business lenders.  The benefits of this type of loan are less paperwork and a quick funding time.  Keep in mind that the number one reason that businesses fail is not quality control or theft; it is simply that they run out of money.  For a desperate business owner, fast money has a lot of appeal.

The dark side to these loans is their breathtaking high interest rates. Interest payments are front loaded, so that even if the loan is paid off early, the business has paid the interest for the entire loan term.  Another negative is the very short repayment terms, with 6 months being common. Online business lenders obtain authorization to charge the business account DAILY for payments. While a $200 payment may not seem like much, but we’re talking $200 DAILY. That type of aggressive payment is a killer for most businesses.

What seems to happen to these high interest/short repayment business loans is that they either go into default, or given time, they are refinanced with banks or other lenders that have more reasonable repayment terms.  TABASFUNDING has done some refinancing of the quick repayment loans. We would be glad to talk with you about your situation, so give us a call, 610-896-2400 or email us at Lee@Tabasfunding.com.

 

Old Hotels

Posted by leetabas

Spring 2018

Nancy and I love staying at elegant old hotels, built in scenic out-of-the-way locations, where the destination is the objective.  Some examples are the Grand Hotel, built on an island in Lake Huron, and the Balsams Hotel, pressed against Canada in Dixville Notch, New Hampshire. Closer to home, we like Skytop Lodge, which offers broad views of the Pennsylvania Poconos. Our most recent old hotel visit was to The Greenbrier in White Sulphur Springs, West Virginia.  My parents took me there several times as a child. We continued the tradition, taking our children there 35 years ago.  The photo on the right is of our two oldest children (now 38 and 40), in front of one of the Greenbrier’s cottages; on the left, is me 35 years later.

Many of these hotels were built by railroads. In order to visit the scenic location, guests traveled by rail and stayed in railroad owned hotels. The Greenbrier still has a train station, and is rail accessible from Washington DC. It was owned for many years by CSX railroad and its predecessors.

Our “bucket list” purpose in visiting the Greenbrier was to see “The Bunker,” a cold war era hideout built to accommodate the House and Senate in the event of nuclear war.  Also, we were curious to see if the hotel still met our high, 35-year-old expectations.

“West Virginia Mountaineers” isn’t just a slogan. The Greenbrier is nestled in mountainous territory, split by the Howard River.  In 1958, during the Eisenhower administration, Congress approached the Railroad with the idea of building The Bunker. Cleverly, it was built as part of the “West Virginia Wing” room expansion that included meeting facilities. Rather than hide The Bunker, several of the rooms, including part that looks like a large exposition area and an auditorium type area were (and still are) open for meetings and conferences. The auditorium area could quickly be converted into a chamber for the House of Representatives, while the exposition space was planned as work space for Congressional staffers.

The entrances are blast doors, resembling those on bank vaults. The blast doors where one enters from the Hotel are cleverly disguised. They recess into the wall, and are covered with flowery Dorothy Draper wallpaper.

In addition, there were dormitories, a medical clinic, a cafeteria, and a communications briefing room. Upon arrival, one was supposed to remove one’s clothes, presumed to be contaminated by radiation. Everyone was to shower, and then army fatigues were to be issued. Your clothes would be incinerated.  This whole facet is pretty creepy.

Of course, The Bunker needed a power plant, water, and food. Food was delivered weekly– enough for hundreds of people.  As expiration dates neared, food stores were recycled to feed hotel employees.

The Bunker stayed secret from its completion in 1962 to 1992, at which time a Washington Post reporter leaked the story.  By that time, The Bunker was obsolete. Recall that the first nuclear bombs were delivered by aircraft. Under that scenario, a warning system would allow time to evacuate Congress from Washington to West Virginia. In the 1990’s missiles supplanted aircraft as the primary nuclear weapon delivery method. With their greater speed, there is no time to shelter at remote locations. There must now be a bunker in or near Washington for Congress.

The Greenbrier itself is much different than newly built hotels. Today, even 5-star hotels have modest public areas, which save on energy and maintenance.  The Greenbrier has massive public spaces, including lobbies, reading rooms, bars and hallways.  The buildings are sprawling, on 12,000 acres, and require constant maintenance.  In 2009, during the heart of the recession, CSX, the owner, put the Greenbrier into bankruptcy.  Six hundred fifty employees were laid off.  In 2010, Jim Justice, a coal billionaire, and the richest man in West Virginia, bought the hotel.  He re-hired employees and set about maintaining and improving the hotel. In our opinion, he’s succeeded. This is an area where, besides the Greenbrier, not much is going on. Jobs that the hotel provides are good ones, with benefits. Each restaurant or hotel bill comes with a 7 or so percent surcharge for “historic restoration”, the cost of keeping up the place.  They’ve added a casino, a sports performance center, and other activities that people like today.

In addition to being a coal magnate, and owning The Greenbrier, Justice is now the governor of West Virginia.

Development is something that helps these old hotels on large tracts of real estate to survive. The Greenbrier has developed vacation houses on the surrounding mountains and along the fairways.  With so much acreage, selling off an acre or two for a couple of hundred thousand dollars is a no brainer.  In addition to the money it brings in, homeowners then play golf, have meals, and bring others to the area.

I doubt that I would agree with the politics of Jim Justice, but I salute him for taking on the burden of running the Greenbrier. He’s helping the local economy and the state in general by operating this grand old hotel.

_______________________________

Since 2002, TABASFUNDING has been providing funds in the form of loans from $100,000-$750,000 to entrepreneurs who want to expand or acquire businesses.  We will look at other business situations which require capital, effort, management, and patience.  If you run across a situation, please call for further information.

_________________________________

LEE TABAS is available as a consultant or an expert witness. Areas of expertise include: banking & business litigation matters: loans, deposits, administration, collection, leadership, liability, and conflicts of interest. Experience as a Trustee for Trust and Foundations.  Please call for further information.

_________________________________

For uniquely designed bicycle clothing and gear, contact Melissa Tabas, Proprietor, LASER CATS AND SUCH, Lasercatsandsuch.bigcartel.com, 610-308-4433.

Banks and Fiduciary Duty

Posted by Andrew Mazer

Banking expert witness

For attorneys seeking an expert banking witness in the Delaware Valley.

Does a Bank Have Any Responsibility for Making Loans Ending in Default?

The economy is good now, but business doesn’t stay great forever. In a year or three, there will be a downturn, and a trail of bad bank loans for developers and others who invested in real estate and other things.  Banks then sue the investors to collect on the defaulted loans.   Creative legal teams have tried to argue that banks have some responsibility to advise, appraise, or evaluate the prudence of investments for customers. ( see Wells Fargo Bank N.A. v Vandorn  http://www.starrausten.com/do-bankers-have-a-fiduciary-duty-to-their-customers/ ) .What courts have consistently ruled is that in ordinary lender- borrower relationships, the lender does not owe any such duty to the borrower.

In kind of a reversal of fortune, is a banker obligated to tell the government if something underhanded is going wrong?  What if a bank is outside the US- does the banker have an obligation to tell the IRS if someone is cheating on taxes? In United States v. Edgar Paltzer and Stefan Buck, No 1:13-cr-00282-JSR (S.D.N.Y.), Stefan Buck was an officer at Bank Frey, in Switzerland.  Since the larger Swiss banks were expelling American Clients, left and right, Bank Frey decided to welcome them. Unlike the big banks, Bank Frey had no US offices and therefore no obligations to the US Government.

Bank Frey actively solicited American accounts from the larger banks, offering bank accounts and ATM cards.  Clearly, the motivation of some or all of the account holders was to hide funds from the IRS.

Several of Mr. Buck’s clients were approached to make deals, and reported that Mr. Buck was their contact person.
The Feds said that Mr. Buck helped his customers hide millions. When this had happened to other Swiss bankers, they either stayed within Switzerland, or made deals with the US Government. Mr. Buck decided to face the music, and came to the US, hired an attorney, and decided to fight back.  Jurors heard from a parade of Mr. Buck’s former clients, which painted him as a crucial cog in tax avoidance programs.  Mr. Buck said that he was under no obligation to tattle; in fact, Swiss secrecy laws prevented him from doing so. Buck’s attorney posited that his client had nothing whatsoever to do with tax cheaters deciding to cheat- that was strictly the American’s decision. The judge, Jed S. Rackoff, lauded Mr. Frey for freely coming to the United States to face the music.

The jury took less than an hour to acquit Mr. Buck.

I do think that the situation is different, though when it comes to basic banking transactions for ordinary people. We’ve all heard of sharp tellers protecting senior citizens from unscrupulous players who seek to steal their life’s savings.

I provided expert witness opinion in Philadelphia in a related situation, Hughes v. Angelo, Hub Bank (now TD Bank), et al, Philadelphia, Pennsylvania CCP November 2007.

In Philadelphia, the greater area of Southeastern Pennsylvania, Central and South Jersey, and Northern Delaware, Lee Tabas of TABASFUNDING is often called upon as expert witness in court cases in such matters.

Currently a private lender for growing companies in the region and former president of Royal Bank of Pennsylvania, Lee Tabas is skilled experienced in business, lending and banking.

Helping

Posted by leetabas

Winter 2018
In December, I attended a groundbreaking for the first LGBTQ friendly affordable housing in Pennsylvania. The new residences will be built near 8th and Girard. Girard Medical Center seemed to be most of what is going on in that area. I saw row houses, old factories, remnants of the Reading rail line and cracked, weed-overgrown concrete.

The program might be long, so I wanted to take a bathroom break before it started. There was no bathroom at the site, so I was directed to the medical center across the street. Girard Medical Center is needy; clean, but worn, and has been operating in bankruptcy. The guard had to let me into the rusted door of the bathroom. This is not a Main Line hospital/medical center. Girard Medical Center is bare bones and specializes in drug and alcohol rehab. People were waiting around before or after treatment.
Sister Mary Scullion, cofounder of Project Home greeted people as we walked into the tent erected for the groundbreaking. Nancy and I are fortunate to have been able to support Project Home for a number of years.

People present were supporters, politicians, officials, and gay rights activists. In addition to the usual puffery, I learned some things from the speakers.
• Of the ten largest cities in the United States, Philadelphia is the poorest.
• Of the ten largest cities, Philadelphia has the lowest rate of homelessness. In large part that is due to Project Home’s advocacy.
• About a third of young homeless people are LGBTQ.
• Jessie Keel, a young resident of another Project Home residence spoke about how she was getting her life together after a period of couch surfing with friends and relatives. I was surprised how well she spoke in front of the hundred or so people present. In addition to working, she is taking classes at Philadelphia Community College.
• John Middleton spoke. The Middletons sold their pipe, cigar, and Tobacco Company to Altria, the successor to Phillip Morris and are wonderful philanthropists. They have been active not only in giving money, but working to bring the new residences toward completion. Middleton was concerned about loss of affordable housing tax credits, which I understand were preserved in the new tax bill.
• Darrell Clarke, President of City Council, spoke. Up until then, I didn’t think much of him- I recall that he declined to hold public hearings to discuss a sale of Philadelphia Gas Works which I thought was a dumb thing. Hearing him in person, however, I felt differently. He seemed bright and well spoken. He lived not far away from 8th and Girard and appears to be a strong advocate for his constituents.
• I’d never heard Mayor Kenney speak before either. Maybe he faked the tear he shed at the groundbreaking, but I don’t think so. He said he believes that cities will save the nation because of their diversity.

Here are some of my thoughts: It’s important to get out of your comfort zone, to see how the other half lives. I saw it that cold day in December.
Skilled and trained workers are a must in order for the economy to continue growing. With unemployment at historic lows, what will be the source of those workers? They probably won’t be immigrants. Maybe some of them can come from North Philadelphia?

Recently, I read “The Innovators”, by Walter Isaacson. The book tells the story of developers of computers and the internet. A common theme for many of the innovators was that their parents were teachers or engineers. They had a love and the opportunity to study science and math at an early age. Many children living near 8th and Girard probably don’t have the parental advantage that the innovators had.

We support the Hope Partnership for Education, which operates a middle school at 12th and Lehigh, also in North Philadelphia. Nancy is on the Board, and teaches there as
well. Hope seeks to bring willing children up
to math and reading at grade school levels so that they can get into a good high school.

2017 has been a great year for those of us fortunate to have had parental advantages, attended good schools, have good healthcare, experienced a good family situation and have financial assets. I believe that we’re obligated to help those less fortunate.

Politicians often use the expression “hardworking families”. Not all families are hardworking, rich or poor. Some can’t work because of illness, lack of education and training, drug addiction. Some don’t work because they don’t have to. Some are deadbeats who want to freeload off others. Just because there are a few bad apples, it doesn’t mean that we shouldn’t do what we can to help people climb out of poverty and homelessness.

If I get a tax cut from the new tax law, I won’t be eating extra dinners or buying new clothes. If a poor family climbs out of poverty by having a better paying job, decent housing, affordable quality healthcare, they will spend and buy new things. It won’t be easy, but maybe they can be an asset to our society. That helps business.
_______________________________
Since 2002, TABASFUNDING has been providing funds in the form of loans from $100,000-$750,000 to entrepreneurs who want to expand or acquire businesses. We will look at other business situations which require capital, effort, management, and patience. If you run across a situation, please call for further information.
_________________________________
LEE TABAS is available as a consultant or an expert witness. Areas of expertise include: banking & business litigation matters: loans, deposits, administration, collection, leadership, liability, and conflicts of interest. Experience as a Trustee for Trust and Foundations. Please call for further information.
_________________________________
For uniquely designed bicycle clothing and gear, contact Melissa Tabas, Proprietor, LASER CATS AND SUCH, Lasercatsandsuch.bigcartel.com, 610-308-4433.

Theft

Posted by leetabas

Fall 2017

When I was a teen, my father and uncle owned Downingtown Inn and Country Club, a resort hotel in Downingtown, Pennsylvania. My father was the COO, while my uncle was the CFO in the back office.

The hotel featured all kinds of sports activities including a golf driving range. The driving range was leased out to the golf pro. I think my father and uncle saw this as a way to reduce supervision. Rather than a fixed rent, the rent was based on the number of buckets of golf balls sold. This arrangement made good sense. If the sales were weak, the rent was low. If the sales were good, then the rent increased.

My father and uncle grew up during the Depression, and both worked from an early age; my brother and sisters and I were expected to work. The hotel was summer camp and weekend job for us all rolled into one.

My father suspected that the golf pro was cheating- not giving an honest count when reporting the buckets of golf balls sold at the driving range. Your assignment, Dad said to me and brother Robert, is to watch the golf driving range for a full day of operation, count the number of buckets sold, and see if that corresponds with the number reported when the golf pro pays the rent.

Our methodology was to station ourselves inside a vacant building across the highway from the golf driving range. We peered with binoculars out the window of the darkened building and ticked off each bucket of balls sold on a pad. The outcome was that the golf pro was not cheating, so in a sense, it was a waste of time. In another sense though, we verified that the guy was honest.

Letting associates know that you are watching is an important deterrent. There is the joke about the bar owner who watched from a dim corner as the bartender served one drink after another, putting half the cash from each sale into his pocket, and the rest into the cash register. After one sale, the bartender put all the cash into his pocket. The owner walked up to the bar and confronted the bartender. “What’s the matter, aren’t we partners anymore?”

Of course, if the transactions had been with a credit card, this would not have been possible, but as we all know, there is plenty of other monkey business that can be done with cashless transactions. Waiters have used credit cards to run themselves tips, in the hope that card owners were not watching.

After the hotel, we were in the restaurant business in Philadelphia. I recall finding an entire rib of beef, probably 30 pounds of meat, in the dumpster in back of the restaurant one day. The meat had been recently taken out of the refrigerator and Cryovac’ed (shrink wrapped in plastic). The thief planned to get it out of the dumpster and take it home later on.

My editors suggested that when writing about theft, I should discuss cyber theft, and the effects of the recent Equifax theft of millions of people’s personal information, or the theft of shareholder value by corporate frauds like Enron, or Tyco. I don’t have any particular experience or expertise in these areas; I try to write about what I know.
As business managers, we try to hire people who are not thieves, and who have attitudes similar to ours. We perform criminal checks, and administer surveys that indicate their attitudes to help make better hiring decisions.

I believe there is no substitute for doing things “the dumb way”- go look. Look in dumpsters, check and count inventory, walk around the place of business to say hello, look at co-workers’ computer screens. I call it “showing the flag” and believe letting people see that you are looking helps to keep them honest.

Perhaps employee theft is one of the reasons driving the “gig” economy. Uber doesn’t have to worry much about drivers and theft of time; they work for themselves and buy their own gas. Recently, Aldi, the German food retailer announced they will be partnering with Instacart to use independent individuals and their cars for food delivery. They won’t have to worry about theft of time, because drivers will work for themselves. They, as with all of the delivery services, still have the concern that everything ordered gets to the customer. Certainly items can be tracked and cameras can be watching. There still needs to be someone observing the screens to see what’s happening on camera, though.

About a year ago, we went to dinner at the Plymouth Meeting Mall. We’d parked our car in front of Macy’s. As we returned to the car, we saw a couple of women running with handfuls of clothes, and getting into a van not far from us. An alarm buzzed in the distance as they drove off. It was a grab and run theft from Macy’s. Macy’s was apparently so lightly staffed that no one was around to come out the front door after the thieves. The local store is one of 68 Macy’s stores across the country that will be shuttered in order to save money. Macy’s says that it is re-investing in e-commerce. Meanwhile, the e-commerce companies are seeking bricks and mortar locations. Retail theft is one of the disadvantages with which they will have to contend.

On a positive note, most people are honest; if that was not the case, our society would not function. We still need a person checking up through binoculars, though.

_______________________________
TABASFUNDING provides entrepreneurs with funding to acquire or expand businesses in the form of flexible loans from $100,000 to $750,000, or more. We supplement bank and other funds, and consider most types of businesses in Pennsylvania, New Jersey, and Delaware. Please call for further information.
_______________________________
LEE TABAS is available as a consultant or an expert witness. Areas of expertise include: Ability to help through experience in banking and investing: loans, deposits, administration, collection, leadership, liability, conflicts of interest and documentation. Experience as a Trustee for Trust and Foundations. Has track record of helping entrepreneurs with growth. Please call for further information.
________________________________
For uniquely designed bicycle clothing and gear, contact Melissa Tabas, Proprietor, LASER CATS AND SUCH, Lasercatsandsuch.bigcartel.com, 610-308-4433.

The Boat Show

Posted by admin

Summer 2017

My brother Robert and I own an antique boat, a 1947 Ventnor that belonged to our father. We had the boat restored over 8 years, and began to use it in 2013.

The Ventnor mostly stays on a trailer in the garage. We take it out a couple of times a season, and joined the Antique and Classic Boat Society (ACBS), a club for classic boat owners.

Other than the Ventnor, I’ve been out of the boating scene for 25 years. We used to have a sailboat, but the family crew bailed out on me, and I sold the sailboat.

The ACBS asked for volunteers to staff a booth at the Atlantic City Boat Show in March, and I volunteered. As I drove to Atlantic City at 9 a.m. that cold windy winter morning, the Convention Center loomed up like Emerald City impressing Dorothy. I’d never visited before. The Convention Center is huge- it looks as big as Philadelphia’s. It was a challenge just finding the ACBS booth inside.

The Center was packed with …Boats! Why was I surprised? Because in 2007 as with the housing and auto industries, the boating industry was dead. The boat business edged back from the brink, and as I was learning, has revitalized itself. While some of the engines are imported, the boats are largely made in the USA. The enormous show hall was overflowing with boats. These were not yachts fit for Donald Trump; they were targeting the upper middle and upper class average person.

In addition to boats, a successful show needs boaters. Families mobbed the show. People must be confident when they consider spending $50,000-$75,000 which was my sense of what the average boat on display cost.

More can be extrapolated from the Boat Show. Most people don’t have the entire purchase price to kick in. Financing must be available today. Fuel must be fairly reasonable; this was a powerboat show. If people want to fish or to joyride, they need to be able to fill the tank.

I noticed a 42’ fishing boat near the ACBS display, with four 350 horsepower outboard engines. The boat seemed nice, but nothing grand. I guess-timated $25,000 an engine, so figured the boat must sell for a couple of hundred thousand dollars. How wrong I was. Here is the photo I took when my shift ended at the ACBS.

I wonder how many buyers took advantage of the “Boat Show Special” $769,000 price tag?

My job in the ACBS booth was to chat up potential members who might have classic boats, or be interested in buying them. Owners get tired of them, as with anything else and put them up for sale. As I learned, compared to a new boat, a classic boat can be downright reasonable.

I met lots of nice people and learned that boats and vacation homes are often handed down from generation to generation.

Most of the Boat Show attendees were Caucasian – there were a few African Americans but almost no Asians, and few other ethnic folks by my observation.

This also tells me that the average middle to upper class East Coast Caucasian family feels pretty confident at present, and is doing well.

Our economy has come back from the brink of 2007. Credit George Bush, the Federal Reserve, and Barak Obama.

Let’s hope that something doesn’t rock the confidence of boat buyers who support this mostly domestic “Made in USA” industry.

________________________________

TABASFUNDING provides entrepreneurs with funding to acquire or expand businesses in the form of flexible loans from $100,000 to $750,000, or more. We supplement bank and other funds, and consider most types of businesses in Pennsylvania, New Jersey, and Delaware. Please call for further information.
_______________________________

LEE TABAS is available as a consultant or an expert witness. Areas of expertise include: Ability to help through experience in banking and investing: loans, deposits, administration, collection, leadership, liability, conflicts of interest and documentation. Experience as a Trustee for Trust and Foundations. Has track record of helping entrepreneurs with growth. Please call for further information.
________________________________

For uniquely designed bicycle clothing and gear, contact Melissa Tabas, Proprietor, LASER CATS AND SUCH, Lasercatsandsuch.bigcartel.com, 610-308-4433.